What Happened?

Shares of cybersecurity software maker Rapid7 (NASDAQ:RPD) fell 8% in the pre-market session after the company reported weak fourth-quarter 2024 results: its full-year revenue guidance fell short of Wall Street's estimates. The company expects only 2% to 3% revenue growth in 2025, signaling a sharp deceleration from the 9% growth achieved in 2024. Revenue grew modestly by 5% year on year for the quarter, driven primarily by product subscription sales, which rose by 6%. However, professional services revenue declined by 5%, weighing on overall growth. Earnings also fell below expectations as margins shrunk. 

Looking ahead, management is prioritizing expansion in MDR and exposure management solutions, as it shifts away from the more competitive traditional VM market. While the long-term pipeline appears healthy, the company acknowledged that larger deal sizes and longer sales cycles create uncertainty around the growth acceleration of some key products. Overall, this quarter could have been better.

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What The Market Is Telling Us

Rapid7’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 9 months ago when the stock dropped 21.2% on the news that the company reported first quarter earnings results. While revenue and EPS narrowly topped Wall Street's estimates, its full-year revenue guidance fell short, and was lowered. In addition, its free cash flow was down 54.3% from the previous quarter. Overall, this was a subpar quarter for Rapid7.

Rapid7 is down 11.7% since the beginning of the year, and at $34.78 per share, it is trading 42.6% below its 52-week high of $60.60 from February 2024. Investors who bought $1,000 worth of Rapid7’s shares 5 years ago would now be looking at an investment worth $626.67.

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